The projected fair value for Phibro Animal Health is $10.10. based on the dividend discount model
The current share price of $13.06 indicates that Phibro Animal Health is 29% overvalued.
Our fair value estimate is 41% below Phibro Animal Health’s analyst target of $17.00.
Today, we will use one method to estimate the intrinsic value of Phibro Animal Health Corporation (NASDAQ:PAHC) based on its expected future cash flows and discounted to present value. We will make use of the discounted cash flow (DCF) model for this purpose. Before you think you won’t get it, read it! It’s actually a lot less complicated than you might think.
Companies can be valued in many ways. So we’ll point out that DCF isn’t perfect for every situation. If you still have some interesting questions about this type of valuation, Let’s look at Simple Wall St’s analytical model.
See our latest analysis for Phibro Animal Health.
Is Fibro’s Animal Health Worth It?
Because Phibro Animal Health operates in the pharmaceutical sector. We need to calculate the actual value slightly differently. In this approach, dividends per share (DPS) are used because free cash flow is difficult to assess and is often not reported by analysts. This often underestimates the value of the stock. But it still compares favorably with its competitors. A ‘Gordon Growth Model’ is applied, which assumes dividends will continue to increase at a sustainable growth rate forever. for many reasons Therefore, a conservative growth rate is used. This does not exceed the company’s gross domestic product (GDP) rate. In this case, we use the 5-year average of the 10-year government bond yield (2.1%). The expected dividend per share is discounted to the value of the Today at a cost of equity of 6.9% compared to the current share price of $13.1. The company seems slightly overvalued at the time of writing. Valuation is an inaccurate tool. somewhat like a telescope Moves a few degrees and ends up in another galaxy. don’t forget this
Value Per Share = Expected Dividend Per Share / (Discount Rate – Continuous Growth Rate)
= 0.5 USD / (6.9% – 2.1%)
= 10.1 USD
We will point out that the most important input to the discounted cash flow is the discount rate and, of course, the actual cash flow. Part of the investment comes from your own assessment of the future performance of your company. So do the calculations yourself and verify your own assumptions. Also, DCF doesn’t consider the potential cycles of the industry. or the company’s future capital requirements. Therefore, it does not provide a complete picture of the company’s performance. Since we view Phibro Animal Health as a potential shareholder. Therefore, the cost of equity is used as the discount rate. instead of the cost of capital (or the weighted average cost of capital WACC) representing liabilities In this calculation, we use 6.9%, which is based on a leveraged beta of 0.800 beta, as a measure of stock volatility. compared to the overall market We derived the beta from the industry average beta of comparable companies around the world. With limits set between 0.8 and 2.0, this is a reasonable range for a stable business.
SWOT Analysis for Animal Health Fibro
Although the valuation of a company is important, But it’s just one of many. Factors you need to assess for the company It is not possible to obtain foolproof valuations with the DCF model. The best use of the DCF model is to test certain assumptions and theories to see if that will lead to undervalued or overvalued companies. No. For example, a change in a company’s cost of capital or risk-free rate can have a significant impact on the valuation. Can we figure out why the company is trading at a premium to its intrinsic value? for animal health of fibro There are three related issues you should consider:
risk: Please note that Phibro Animal Health is showing. 3 warning signs in our investment analysis And 1 of them was quite unsatisfactory…
future income: How does PAHC’s growth rate compare to its competitors and the broader market? Dig deeper into the analyst consensus numbers for the coming years. Go by interacting with our free analyst growth expectation chart.
Other high-quality alternatives: Do you like a well-rounded person? Explore our interactive high-quality stock lists to understand what else you may have missed!
P.S. Just Wall St updates the DCF calculations for every American stock daily. So if you want to find out the true value of another stock. search here
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This article by Simply Wall St is very general. We provide our opinions based on historical data and analyst forecasts using an unbiased method only. And our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock. And it doesn’t take into account your objectives or financial situation. We strive to deliver long-term focused analytics driven by fundamental data. Please note that our analysis may not take into account recent company announcements based on price or qualitative content, simply that Wall St does not have a position in any of the stocks mentioned.
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